The genetically tractable endophytic fungus Piriformospora indica is able to colonize the root cortex of a great variety of different plant species with beneficial effects to its hosts, and it represents a suitable model system to study symbiotic interactions. Recent cytological studies in barley and Arabidopsis showed that, upon penetration of the root, P. indica establishes a biotrophic interaction during which fungal cells are encased by the host plasma membrane. Large-scale transcriptional analyses of fungal and plant responses have shown that perturbance of plant hormone homeostasis and secretion of fungal lectins and other small proteins (effectors) may be involved in the evasion and suppression of host defenses at these early colonization steps. At later stages, P. indica is found more often in moribund host cells where it secretes a large variety of hydrolytic enzymes that degrade proteins. This strategy of colonizing plants is reminiscent of that of hemibiotrophic fungi, although a defined shift to necrotrophy with massive host cell death is missing. Instead, the association with the plant root leads to beneficial effects for the host such as growth promotion, increased resistance to root as well as leaf pathogens, and increased tolerance to abiotic stresses. This review describes current advances in understanding the components of the P. indica endophytic lifestyle from molecular and genomic analyses.